After more than two years of Government consultation, the Enterprise and Regulatory Reform Act 2013 was finally published in May, having received Royal Assent in April. Full implementation is anticipated within a year.
As we explained here, the Act will bring about major reforms to the UK's competition regime, most notably by abolishing the OFT and the Competition Commission and transferring their competition functions to a newly established Competition and Markets Authority (CMA).
While these competition reforms remain largely intact following the Bill's passage through Parliament, it is the removal of the requirement for dishonesty in criminal prosecutions of individuals for the 'cartel offence' which provoked the biggest reaction during consultation. Indeed, concerns over this change (which is intended to render prosecutions easier) led the Government to introduce a number of additional defences to prevent commission of the offence by an individual who can show that they:
- Did not intend at the time of entering into the agreement to conceal the nature of the arrangements from the CMA or, in respect of arrangements that would affect the supply of a product/service in the UK, from customers (at all times before such customers enter into agreements for the supply to them of the product/service); or
- Took reasonable steps before entering into the agreement to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them prior to making or implementing those arrangements.
While there is no requirement that such legal advice be favourable, this 'legal advice defence' only evades commission of the criminal cartel offence and not the civil consequences of infringing competition law, including fines of up to 10% of the infringing companies' global group turnover and the disqualification of directors.
In addition, the cartel offence will not be committed where customers (or purchasers requesting bids) would explicitly be given certain specified information about the arrangements in advance, or if the agreement is made to comply with a legal requirement.
While certain provisions of the Act relating to the establishment of the CMA entered into force upon its enactment on 25 April, most will need to be implemented by statutory instrument. Hence, the CMA is expected to come into existence in October 2013 but is not scheduled to become fully operational until April 2014.
Given the criticism the OFT has faced for not prosecuting more cartels, we anticipate that the CMA will be looking for suitable ways to flex its new cartel offence muscles very soon after its inception.